Russia
Russia 090526
Basic Political Developments
• Russia to indefinitely postpone cooperation meeting with DPRK
• Report: NKorea test-first 2 more missiles - Russia, which called the test a "serious blow" to the effort to stop the spread of nuclear weapons, suspended a Russia-North Korean intergovernmental trade and economic commission, apparently in response to the nuclear test. The slap on the wrist was a telling indication that Moscow, once a key backer of North Korea, was unhappy with Pyongyang…
• Russia to sign new uranium contract with US - Under the contract, state-run Tekhsnabeksport would supply U.S. markets with nuclear fuel enriched from raw uranium for the first time, Tekhsnabeksport marketing executive Vadim Mikerin told The Associated Press.
• Russian Uranium Sale to U.S. Is Planned - Russia, already a large supplier of nuclear-reactor fuel to Europe and Asia, is expected on Tuesday to sign its first purely commercial contract to supply low-enriched uranium to United States utilities.
• Russia returns aircraft to US over swine flu fears - The charter flight was carrying crew and five passengers to Anadyr, in the far north-east of Russia. However one of the passengers suffered a high temperature during the flight and Russia’s health authorities were put on standby to quarantine all on board and to disinfect the plane when it landed.
• U.S. plane landed in Anadyr returns to U.S. after crewmember found with high temperature
• Venezuelan President Hugo Chavez had telephone conversation with Russian PM Vladimir Putin - The Venezuelan president briefed the Russian premier about his latest visit to Ecuador and an upcoming visit to Brazil.
• Finland awaits Putin visit - Russian Prime Minister Vladimir Putin will visit Finland in the course of June, Finnish Prime Minister Matti Vanhanen confirmed this week.
• Russia, Kazakhstan to discuss cooperation with OSCE, NATO – Kazakh official - The Kazakh and Russian Foreign Ministries are to hold consultations in Moscow on May 7
• Gazprom 'Ukraine may fail to pay gas bill' - "If there is any disruption in payments for May supplies, Gazprom will have to move over to 100% advance payments." Gas export monopoly Gazprom says it wants to store extra gas in Ukraine during winter to be able to respond more quickly to the needs of its customers in Europe.
• Russia-Belarus firm to export Pechora-2M systems to 5 countries - "We will deliver Pechora-2M air defense systems to three former Soviet states and two [other] foreign countries soon," Vyacheslav Karatayev said, without specifying the customers.
• Five killed in Russian Caucasus violence - A Russian soldier, a policeman and three rebels were killed in an upsurge of violence in the North Caucasus region, Russian news agencies reported.
• Chechnya roadside blast kills soldier, injures two - The bomb went off late on Monday near the village of Novy Tsentoroi when a Defense Ministry convoy was passing.
• Police investigating murder of Dagestan’s deputy mufti Tagayev - The murder was committed on Monday evening “in the residential area of Uchkhoz on the territory of the countryside settlement,” the press service of the Dagestani Interior Ministry told Itar-Tass on Tuesday.
• Senior Muslim cleric assassinated in south Russia
• 3 Chechen policemen killed in Ingushetia in mine burst
• General Shamanov appointed commander of Airborne Troops - Lieutenant-General Vladimir Shamanov was appointed as commander of the Russian Airborne Troops, spokesman for the Russian Defence Ministry Alexander Drobyshevsky told Itar-Tass on Monday.
• Riot Police Officer Caught Trying to Sell Arms - An OMON riot police officer was arrested Monday in a sting operation while trying to sell explosives and ammunition that he purportedly stole from the arms depot he was tasked with overseeing, police and prosecutors said.
• Discontent Rises Sharply Among Russian Troops - Military Overhaul Brings Layoffs, Lost Apartments
• New Moscow Proposals Infuriate Russians in Siberia, Far East - Two Moscow proposals last week – President Dmitry Medvedev’s suggestion that China help develop the Russian Far East and a Duma suggestion that Siberian river water be diverted to Central Asia – are adding to the outrage many Russians beyond the Urals feel, as the recent wave of protests in Vladivostok, toward the central government.
National Economic Trends
• Russia’s GDP reduced by 10.5% in April 2009, thus going down 9.8% for four months of 2009
• Deputy finance min sees budget deficit at over 9% of GDP in 2009
• Reports: Russian economy could shrink by 8 pct
• Russian economy contracts 10.5 pct in April
• Russian trade surplus halves in April - Econ Ministry
• Russia to have budget deficit of 9% GDP in 2009 - govt source
• Kudrin Predicts $50 Oil Next Year - The figure -- a significant improvement on the prediction of $41 oil for this year's budget -- came immediately after a warning from President Dmitry Medvedev to use more caution in making forecasts because the economy is sliding into a deeper recession than expected.
Putin proposes postponing submission of draft budget to Oct 1
• WSJ: Russia Faces Budget Cuts Amid Crisis
• Medvedev outlines key points of budget message
• Budget address prioritizes domestic over external borrowing – Kremlin aide
• Russian budget deficit to make up 7.4% of GDP in 2009, 5% in 2010, 3% in 2011
• Russia may borrow over $7 bln abroad in 2010 - Kudrin
• Russian govt approves tax policy for 2010-2012 – Kudrin
• Budget windfalls could still fall short of 2009 budget calculations –Kudrin
Business, Energy or Environmental regulations or discussions
• Russian Stocks Fall as Ruble Drops Most in Month; VTB Slides
• VTB Group, Russian State Bank, Wins Kazakh Banking License
• Deripaska nears deal to retain empire –WSJ: Russian tycoon Oleg Deripaska is close to agreements to restructure his companies' multi-billion-dollar debts, The Wall Street Journal reported on Monday, citing an interview with a senior official within Deripaska's Basic Element holding group.
• Norilsk Posts $555M Loss on Write-Down
• TMK board approves dividend for 2008
• TMK Seeks EBRD Loan - TMK is in talks with the European Bank for Reconstruction and Development on a $200 million loan, Vedomosti said Monday, citing an unidentified person familiar with the negotiations.
• Russian mobile retailer Yevroset forced to leave post-Soviet markets - Yevroset, a major Russian and CIS mobile phones retailer, continues its escape from the post-Soviet market: having already left the Baltic countries, Uzbekistan and Azerbaijan, Yevroset has announced it is leaving Moldova and Armenia, and may also close operations in Belarus and Kyrgyzstan, Russian Kommersant daily writes Tuesday.
• Sainsbury Mulling Russia - J Sainsbury, Britain's third-largest supermarket chain, may open stores in Russia, Kommersant reported, citing an unidentified Russian retailer.
• AFI Development First-Quarter Net Rises Sixfold on Revaluation
• Moscow Real Estate market awaiting a summer signal - With widespread reports of a major slump, Dmitry Taganov, Head of the Analytical centre at Incom says most of the fall stems from the devaluation of the Russian Rouble against the U.S. dollar in the last quarter of 2008 and first quarter of 2009. He says that falls when expressed in Rouble terms have been much less.
Activity in the Oil and Gas sector (including regulatory)
• Gas Output May Fall 20%
• Gazprom Neft, TNK-BP eyeing Kazakh refinery – sources
• BP Nominates Head for Russian Venture - BP PLC said it nominated Pavel Skitovich, the former head of Russia's largest gold miner, as its candidate for the post of chief executive of TNK-BP Ltd., its Russian joint venture.
• FT: BP moves to settle TNK clash - The move came after Vedomosti, the Russian business daily, reported that TNK-BP’s board might nominate Viktor Vekselberg, the company’s executive director, as chief executive at its next meeting in June.
• Russia finds growing competition for Central Asia's oil and gas - Gazprom needs Central Asian gas to help cover demand in Russia and support its 150bn cubic metres a year (cm/y) export business to Europe, which runs via Ukraine. Central Asian imports partly compensate for production falls at Gazprom's large fields in western Siberia and allow the company to delay hugely expensive projects in the Arctic Yamal peninsula, such as the technically challenging Shtokman gasfield development in the Barents Sea. Among Russian projects in Central Asia, Gazprom is drilling some 20 exploration wells in the Ustyurt region of Uzbekistan, where gas reserves are estimated to amount to about 1 trillion cm. Gazprom has agreed to invest $400m exploring in the region before the end of 2011. Lukoil was also planning to produce 2.7bn cm of gas this year from its Kandym-Khauzak-Shady production sharing agreement (PSA) in Uzbekistan, which came on stream in 2007, though the crisis may reduce that amount.
• Nabucco € what's in a name? - The Russians aren't happy about this project as it seeks to break their stranglehold over Caspian gas exports and have been pushing their alternative, the South Stream gas pipeline, which runs from Russia's Black Sea coast via Bulgaria, Greece and Serbia to Italy and Austria. At the EU meeting, Nabucco fans Azerbaijan, Georgia, Turkey and Egypt signed off on a deal that is supposed to see the pipeline pumping gas by 2014, but stopped short of actually committing themselves to a construction timetable, which the EU was hoping for.
Gazprom
• Gazprom urges harder work on Nord Stream, South Stream
• StatoilHydro in talks with Gazprom - Norwegian energy major StatoilHydro is in “intense discussions” with Gazprom over joint projects in Russia, Norwegian newspaper Dagens Næringsliv reports.
• Sibir Energy Agrees With Gazprom Neft on Offer for Minorities - Sibir Energy Plc reached an agreement with OAO Gazprom Neft on the terms of an offer for minority shareholders of Sibir after the oil arm of Russia’s state-run natural gas exporter increased its stake.
• Sibir Agrees To Gazprom Neft Takeover At 500p Per Share
• Gazprom Neft closes in on Sibir
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Full Text Articles
Basic Political Developments
Russia to indefinitely postpone cooperation meeting with DPRK
26.05.09 11:40
Russia will indefinitely postpone an intergovernmental meeting in the spheres of economic, trade and technological cooperation between Moscow and Pyongyang, the Itar-Tass news agency quoted an official from Russian Regional Development Ministry as saying on Tuesday.
The meeting is originally slated for May 28-29 to be held in Pyongyang, Xinhua reported.
Report: NKorea test-first 2 more missiles
SEOUL, South Korea, 05.26.2009
By HYUNG-JIN KIM , Associated Press Writer
…
Russia, which called the test a "serious blow" to the effort to stop the spread of nuclear weapons, suspended a Russia-North Korean intergovernmental trade and economic commission, apparently in response to the nuclear test. The slap on the wrist was a telling indication that Moscow, once a key backer of North Korea, was unhappy with Pyongyang…
Russia to sign new uranium contract with US
35 minutes ago
MOSCOW (AP) — Russia will sign a groundbreaking commercial contract on Tuesday to supply U.S. utility companies with enriched uranium fuel, a Russian atomic industry official said.
Under the contract, state-run Tekhsnabeksport would supply U.S. markets with nuclear fuel enriched from raw uranium for the first time, Tekhsnabeksport marketing executive Vadim Mikerin told The Associated Press.
Fuel previously supplied by Russia had been extracted from old nuclear weapons and diluted for commercial use, under a deal aimed at keeping Russian nuclear materials off black markets.
Mikerin refused to say how much the contract was worth or who the buyers would be.
Russia is already the biggest single supplier of uranium fuel to U.S. nuclear plants.
But it has been barred from expanding those supplies because of protectionist measures imposed by Washington after the Soviet collapse.
May 26, 2009
Russian Uranium Sale to U.S. Is Planned
By ANDREW E. KRAMER and MATTHEW L. WALD
MOSCOW — Russia, already a large supplier of nuclear-reactor fuel to Europe and Asia, is expected on Tuesday to sign its first purely commercial contract to supply low-enriched uranium to United States utilities.
With the signing, Russia’s nuclear-fuel trade with the United States will shift to a commercial footing, similar to Russia’s dealings with other consumers of fuel, like France and the Netherlands, both longtime buyers of Russian uranium.
For the United States, the change is a sign that Washington is acquiescing to the idea of a major Russian role not only in the international nuclear power market, but also in the domestic market. Russia’s outsize role in supplying uranium to American utilities had previously been justified because the fuel was a byproduct of a program to eliminate nuclear weapons. Now the Russians will be selling nuclear fuel from virgin uranium.
Yet the contract signing, after North Korea’s nuclear test on Monday, also underscores a counterintuitive element of American nonproliferation policies.
The policy of buying diluted, or blended-down, Russian weapons-grade uranium yielded a clear nonproliferation benefit. The new mode — of having the Russians enrich new uranium for United States markets — is not directly beneficial for nuclear security because it does not remove weapons-grade uranium from stockpiles.
Yet by encouraging the commercial availability of Russian enrichment services, the United States deprives other countries of the rationale to have enrichment programs of their own.
The United States continues to want to see Russian weapons material blended down where possible, and is encouraging a largely open market to allow Russian enrichment facilities built for military purposes to become part of the international market for enrichment.
As a legacy of the cold war, Russia possesses about 40 percent of the world’s uranium enrichment capacity, much more than it needs to service its domestic reactors, and it has sought direct access to the American utilities market for years.
“We are finally working in the principle of mutual profit,” Sergei G. Novikov, a spokesman for the Russian state nuclear energy company, Rosatom, said in an interview about the expected first contract signing.
Techsnabexport, the Russian state company that exports low-enriched uranium, is expected to sign the contract in Moscow with a consortium of American nuclear companies. Techsnabexport declined to identify its American partners or the size of the contract on Monday.
The new contract is separate from a program to dilute surplus weapons uranium into civilian fuel for use in American reactors. Under that so-called megatons to megawatts program, begun in 1993, Russia is already the largest supplier of enriched uranium to American utilities and provides about half of all uranium consumed in civilian reactors in the United States.
Yet Russia has been prohibited from selling directly to the utilities by provisions of American law to prevent dumping at below-market prices, and it was compelled to deal only through a monopoly importer, the United States Enrichment Corporation.
That company was originally part of the United States Department of Energy, and the megaton-to-megawatts deal was a government-to-government agreement. When the United States sold off the enrichment corporation to a private company, the new entity was given a continuing monopoly on the sale of blended-down warhead materials from Russia. The company, USEC, said it paid competitive prices for the material. The Russians, meanwhile, complained that they were being underpaid.
In a negotiated settlement in February 2008, the United States agreed to allow Russia to sell low-enriched uranium directly to domestic utilities without the involvement of the enrichment corporation. But all sales of diluted weapons uranium will still go through the corporation. A spokeswoman for the company said the initial direct Russian sales will be small and will not harm its business.
Nuclear reactors run on uranium that is composed of 3 to 5 percent uranium 235. In nature, uranium is only 0.7 percent uranium 235.
Uranium used in weapons and in the reactors that power nuclear submarines use more than 90 percent uranium 235. “Enrichment” means raising the proportion of 235 compared with the dominant type, 238, and the Russian industry was set up to provide large volumes of high-enriched uranium for weapons and marine reactors.
Russia is a major supplier to the developing world by tapping this cold war-era military industrial base. It has provided 80 tons of low-enriched uranium manufactured into fuel assemblies to Iran for use in that country’s Bushehr reactor, for a price of $46 million, according to Atomstroyexport, the Russian contractor building the reactor.
Andrew E. Kramer reported from Moscow, and Matthew L. Wald from Washington.
Russia returns aircraft to US over swine flu fears
Today, 12:10 PM
A plane has been sent back to the US from Russia because one of its passengers, a US citizen, was suspected of carrying swine flu, Russian website Gazeta.ru reports.
The charter flight was carrying crew and five passengers to Anadyr, in the far north-east of Russia. However one of the passengers suffered a high temperature during the flight and Russia’s health authorities were put on standby to quarantine all on board and to disinfect the plane when it landed.
The plane landed but after standing at Anadyr airport for five hours the passengers, who had chartered the plane, elected to return to the US rather than leave the cabin and be placed in quarantine.
Recently, Russia has reported a second case of swine flu in the country after a Russian national who had returned from a holiday in the Dominican Republic was hospitalized with a high fever.
U.S. plane landed in Anadyr returns to U.S. after crewmember found with high temperature
MOSCOW. May 26 (Interfax) - A U.S. airplane carrying several
passengers, which arrived in Chukotka, flew back to the States after
Russian medics found that one crewmember had a high temperature, said
Gennady Onishchenko, head of the Russian consumer rights watchdog
Rospotrebnadzor and Russia's chief health officer.
A small plane landed in Anadyr from the United States with two
crewmembers and several passengers, including a company vice president,
on board, Onishchenko told Interfax on Tuesday.
"During sanitary checks medics found one crewmember with a high
temperature. The people who were on board were offered to undergo
examination. But they decided to fly back to the U.S. without leaving
the plane," Onishchenko said.
All Russian airports operating international flights conduct a
sanitary monitoring of airplanes and passengers arrived from the
countries hit by A (H1N1) virus.
Russia has registered two cases of swine flu - with a Russian man
who arrived to Moscow from New York and with a Kaluga region resident,
who has arrived from a wedding tour in the Dominican Republic. Both have
been hospitalized.
When asked about their health, Onishchenko said, "They are feeling
normal."
Venezuelan President Hugo Chavez had telephone conversation with Russian PM Vladimir Putin
CARACAS, May 26 (Itar-Tass) -- Venezuelan President Hugo Chavez had a telephone conversation with Russian Prime Minister Vladimir Putin on Monday. The Venezuelan president briefed the Russian premier about his latest visit to Ecuador and an upcoming visit to Brazil.
After a meeting with the foreign ministers of the Bolivarian Alternative for the Americas (ALBA) Chavez will fly to Brazil on Monday evening local time. “Amid the world economic crisis we just have to accelerate the advance movement.”
Hugo Chavez and Vladimir Putin “discussed various issues of Russian-Venezuelan trade-economic cooperation, particularly they exchanged views on several issues concerning the energy dialogue, financial and military-technical bilateral cooperation,” press secretary of the Russian premier Dmitry Peskov said earlier.
Finland awaits Putin visit
2009-05-25
Russian Prime Minister Vladimir Putin will visit Finland in the course of June, Finnish Prime Minister Matti Vanhanen confirmed this week.
The information was revealed by PM Vanhanen this week, Yle News reports.
The projected Nord Stream gas pipeline is likely to be one of the key issues on the agenda.
The visit comes less than two months after the visit of President Dmitry Medvedev to Helsinki. As BarentsObserver reported, the Nord Stream pipeline was high on the agenda also during that visit.
Russia, Kazakhstan to discuss cooperation with OSCE, NATO – Kazakh official
ASTANA. May 25 (Interfax) - The Kazakh and Russian Foreign
Ministries are to hold consultations in Moscow on May 27.
The consultations "will address a wide range of issues related to
cooperation with the OSCE and NATO," Kazakh Foreign Ministry spokesman
Yerzhan Ashikbayev told a briefing in Astana on Monday.
The Kazakh delegation to the talks will be led by Deputy Foreign
Minister Konstantin Zhigalov, he said.
Gazprom 'Ukraine may fail to pay gas bill'
By Upstream staff
The chief of Russia's Gazprom said that he is concerned Ukraine will not pay in full for this month's gas supplies.
"We see the payment situation regarding gas supplies in May as very, very grave," Alexei Miller said.
"If there is any disruption in payments for May supplies, Gazprom will have to move over to 100% advance payments." Gas export monopoly Gazprom says it wants to store extra gas in Ukraine during winter to be able to respond more quickly to the needs of its customers in Europe.
How these storage facilities will be filled, and who will pay to fill them, have become the main sticking point in the most recent gas talks between the former Soviet allies.
A new spat over Ukraine's proposal to defer payment of up to $5 billion in gas storage payments has also prevented agreements which could ensure smooth gas supply to Europe.
Russia, which supplies a quarter of Europe's gas, much of it via Ukraine, has twice cut supplies in recent years due to pricing disputes between Moscow and Kiev, leaving parts of Europe with no gas in the dead of winter.
Russia has called on the EU to help Ukraine pay its gas bills and help avert a new gas crisis, reported Reuters.
Tuesday, 26 May, 2009, 01:59 GMT | last updated: Tuesday, 26 May, 2009, 02:05 GMT
Russia-Belarus firm to export Pechora-2M systems to 5 countries
12:3026/05/2009
MOSCOW, May 26 (RIA Novosti) - The Russia-Belarus financial and industrial group Defense Systems will supply Pechora-2M air defense systems to five countries in the near future, the company's deputy general director said on Tuesday.
The Pechora-2M is an upgraded version of the Pechora (SA-3 Goa) low-altitude surface-to-air missile system. The modernized system features a longer range (up to 27 kilometers), an increased kill probability, better resistance to jamming, and the ability to engage multiple targets, including cruise missiles.
"We will deliver Pechora-2M air defense systems to three former Soviet states and two [other] foreign countries soon," Vyacheslav Karatayev said, without specifying the customers.
He added that the company was holding talks with another 10 countries on sales of Pechora missile systems.
"This system is very popular around the world. However, we have not yet been able to increase the production capacity to 15-17 systems annually, as was the case during the Soviet era," the official said.
Some Russian media sources earlier reported that the portfolio of 2009-2011 export orders for Pechora-2M and Pechora-2A SAM systems totaled 200 units, including 70 for Egypt.
The Defense Systems joint venture was formed in 1996 under a Russia-Belarus intergovernmental agreement. The company comprises 38 subsidiaries in both countries and focuses on the production, export and post-sale servicing of Pechora-2M air defense systems.
Five killed in Russian Caucasus violence
1 hour ago
MOSCOW (AFP) — A Russian soldier, a policeman and three rebels were killed in an upsurge of violence in the North Caucasus region, Russian news agencies reported.
The soldier was killed and two others injured as their convoy hit a bomb near the Chechen village of Novy Tsentoroi, RIA-Novosti and Interfax quoted local police as saying. The time of the attack was not given.
"As a result of the detonation of a roadside bomb made from a 152-millimetre shell a professional serviceman died," a police spokesman told RIA-Novosti, adding that investigators were at the scene.
Police were also searching for an unidentified attacker who shot dead a policeman at a petrol station in the Caucasus region of Kabardino-Balkaria on Monday.
"The inspector died of his wounds in hospital," RIA-Novosti quoted a local police source as saying.
In other incidents, two rebels were killed in separate clashes with police in the Chechen capital Grozny, Interfax reported, quoting police sources.
In both cases the fighters opened fire from their vehicles when ordered to halt for police inspections. The driver of one of the cars then blew himself up using a bomb inside his vehicle, Interfax and RIA Novosti reported.
A rebel fighter was also killed near a village in Ingushetia while he and two others were resisting arrest, Interfax quoted a police source as saying.
The clashes came after four policemen from Chechnya were killed in an explosion on Monday while on patrol along the administrative boundary with neighbouring Ingushetia.
Large parts of the mountainous Russian North Caucasus remain highly volatile in the wake of two full-scale wars fought against Chechen rebels in the post-Soviet era.
Insurgency has been fuelled by a mixture of separatist political ambitions, Muslim fundamentalism and rampant corruption and abuses by the authorities, analysts say.
Chechnya roadside blast kills soldier, injures two
MOSCOW, May 26 (RIA Novosti) - One serviceman was killed and two injured when a roadside bomb exploded in Russia's North Caucasus Republic of Chechnya, a police source said on Tuesday.
The bomb went off late on Monday near the village of Novy Tsentoroi when a Defense Ministry convoy was passing.
In a separate incident, an unidentified gunman in a car fired shots at police, before blowing up his vehicle in the Chechen capital, Grozny.
"The car was damaged and stopped when police returned fire, and the unidentified man, who was behind the wheel, detonated an explosive device and blew himself up," the source said.
The attacker died at the scene. His identity is being established.
Also on Monday, an unidentified man was killed in Chechnya's Zavodskoi district. The man, driving a Lada car, opened fire on private security guards with a Kalashikov assault rifle while crossing a checkpoint, and was killed when they returned fire.
Militant attacks have continued since the official lifting last month of the Kremlin's decade-long anti-terrorist campaign in the North Caucasus republic.
Violence often spills over into nearby republics, in particular Ingushetia and Daghestan.
Late on Monday, four Chechen police were killed in neighboring Ingushetia when a tripwire bomb went off during a joint Chechen-Ingush police operation.
Police investigating murder of Dagestan’s deputy mufti Tagayev
MAKHACHKALA, May 26 (Itar-Tass) -- A criminal case was instituted over the murder of Dagestan’s Deputy Mufti Akhmed-khadzhi Tagayev here on Tuesday. The criminal proceedings were instituted under two articles of the Criminal Code (murder and the illegal circulation of weapons and ammunition).
The murder was committed on Monday evening “in the residential area of Uchkhoz on the territory of the countryside settlement,” the press service of the Dagestani Interior Ministry told Itar-Tass on Tuesday. “Tagayev was coming up to his house in Obshchestvennaya Street at about 22.20 Moscow time on Monday. Meanwhile, the killer jumped out of a silvery VAZ-21099 car parked nearby and presumably made one shot from a PM pistol in the back of the head of Tagayev,” the press service said.
Akhmed Tagayev, 61, died instantly. The killer escaped from the scene.
The investigators consider Tagayev’s professional activities as the main version of the murder. Tagayev was a zealous opponent of Islamic extremism. He has repeatedly written about these problems in his articles in local media outlets and in the Internet.
Tagayev was in charge of public relations in the Spiritual Board of Muslims of Dagestan. Tagayev engaged actively in the public activities in the last few years, particularly chaired the public movement “For Morality”. The Spiritual Board of Muslims of Dagestan took the tragic death of Tagayev “as a great loss for the Muslims of Dagestan.”
Senior Muslim cleric assassinated in south Russia
Mon May 25, 2009 4:43pm EDT
LONDON, May 25 (Reuters) - A senior Muslim cleric was shot dead on Monday in the capital of Russia's volatile southern region of Dagestan, Interfax news agency reported.
Akhmed Tagayev was deputy mufti of the Clerical Directorate of Muslims of Dagestan and was considered a leading opponent of "religious extremism" among Muslims, the agency said.
"An unknown criminal shot Tagayev in the head from a pistol at about 2235 hours...and escaped, probably in a motor car. The deputy mufti died on the spot from a head wound," Interfax quoted a local interior ministry spokesman as saying
Dagestan borders Chechnya, where Russia has fought two wars since the mid-1990s to crush Muslim separatists. As security in Chechnya has improved, instability has worsened elsewhere in the region, where poverty and violence provide a fertile recruiting ground for Islamist militants and rebels.
Russia's Vesti television reported separately on Monday that four policemen from Chechnya had been killed in a special operation in Ingushetia, a neighbouring republic of Russia's troubled North Caucasus. (Writing by Mark Trevelyan; editing by Ralph Boulton)
3 Chechen policemen killed in Ingushetia in mine burst
NAZRAN, May 26 (Itar-Tass) - Three Chechen policemen have been killed in Ingushetia during the conduct of joint special operations by the personnel of the Ingusheita and Chechnya Ministries of the Interior with a view to finding and apprehending members of illegal armed formations. The three policemen stuck a trip-wire-activated landmine, a source in the republic's law enforcement agencies has told Itar-Tass.
The incident occurred at 22:50, Moscow time, on Monday in the area of the inhabited locality of Datykh, Sunzhensky District. According to preliminary data, all the three diedof wounds. An investigation group has left for the scene of the incident.
General Shamanov appointed commander of Airborne Troops
MOSCOW, May 25 (Itar-Tass) - Lieutenant-General Vladimir Shamanov was appointed as commander of the Russian Airborne Troops, spokesman for the Russian Defence Ministry Alexander Drobyshevsky told Itar-Tass on Monday.
General Shamanov earlier occupied the post of the chief of the main department of combat training and military service of the Russian Armed Forces. He replaced Lieutenant-General Valery Yevtukhovich, who was dismissed upon reaching the retirement age this May.
Vladimir Anatolyevich Shamanov was born in Siberia on February 15, 1957. He graduated from the Ryazan Higher Airborne Command School in 1978 and from the Military Academy of the General Staff in 1998. He is a candidate of sociological sciences. He began the military service as a platoon commander, then served at various posts in the Airborne Troops. Shamanov also fought in several flashpoints in the Transcaucasia, including Nagorno Karabakh. He was the commander of the 7th airborne division.
In 1995-1996 Shamanov served as an assistant commander of the United Army Group of the Federal Troops in the Chechen Republic. He was in command of a storming operation of several villages in the Chechen highlands (Bamut and Tsentoroi). In 1995 he was injured, but remained to fight in Chechnya. In 1996 Shamanov was appointed as commander of the United Army Group of the Russian Defence Ministry in Chechnya. He commanded the troops storming the Chechen highland settlements of Dargo and Vedeno. He carried out a special operation in the highlands in western Chechnya, where the Bamut stronghold of militants was captured. In 1998-1999 – the commander of the 20th All-Arms Army deployed in Voronezh, in 1999-2000 – the commander of the 58th Army in the North Caucasus military district and simultaneously the commander of the western grouping of the United Army Group in the North Caucasus, after that an assistant commander of the United Army Group.
On December 24, 2000, Shamanov was elected as chief of the administration in the Ulyanovsk region. On November 16, 2004, he dropped his candidacy during the repeated gubernatorial elections in the Ulyanovsk region and was appointed as Russian premier’s aide for social security of servicemen. In 2006 he was appointed as adviser of the Russian defense minister, since November 2007 he has headed the main department for combat training and military service of the Russian Armed Forces.
Shamanov is awarded the title of the Hero of the Russian Federation. He is married. He has a son and a daughter.
Riot Police Officer Caught Trying to Sell Arms
26 May 2009 The Moscow Times
An OMON riot police officer was arrested Monday in a sting operation while trying to sell explosives and ammunition that he purportedly stole from the arms depot he was tasked with overseeing, police and prosecutors said.
Mikhail Belikov, 56, was detained by police after selling various explosive devices and ammunition for 152,000 rubles ($5,000) to an undercover agent, the Investigative Committee said in a statement.
Police subsequently found Belikov's personal cache of stolen weapons, which included more than 4,300 rounds of ammunition, more than 350 detonating fuses and two grenades, among other explosives, the committee said.
"The suspect has served in the OMON police at least 20 years, and his post allowed him to have total access to the arms," Moscow police spokesman Viktor Biryukov told Interfax.
The Khoroshevsky District Court on Monday sanctioned Belikov's arrest pending the criminal investigation, Interfax said. He is being investigated on suspicion of weapons trafficking and abuse of his position.
Belikov's arrest comes just weeks after officer Denis Yevsyukov, head of a police precinct in southern Moscow, shot three people dead and wounded six others in a supermarket rampage last month. Yevsyukov, who was apprehended following the attack, used a stolen gun in the shooting spree.
Discontent Rises Sharply Among Russian Troops
Military Overhaul Brings Layoffs, Lost Apartments
By Philip P. Pan
Washington Post Foreign Service
Tuesday, May 26, 2009
USSURIYSK, Russia -- As a young officer fresh out of a Soviet military academy, Alexander Primak was assigned to serve in this frontier city in the Russian Far East, eight time zones away from his home town in Ukraine.
He spent the next quarter-century in the region, moving from garrison to garrison, rising to the rank of lieutenant colonel. But he always dreamed of moving back west, counting on the government's promise to reward officers with apartments upon retirement.
Now, as the Russian government pushes ahead with an overhaul of the military that eliminates the positions of more than half the army's officers, Primak is jobless at age 46 and stuck in Ussuriysk waiting for an apartment he may never get.
"They're finding any excuse not to keep their promises," the gray-haired colonel said coolly, maintaining ramrod posture as he sighed over a plastic cup of coffee in a roadside eatery. "When we were young, we put the motherland first. We were ready to tolerate discomfort and wait for something better. . . . Of course I'm disappointed."
Low morale over pay and housing has afflicted the Russian military since the fall of the Soviet Union, but grumbling in the ranks is rising sharply as President Dmitry Medvedev attempts to carry out the most ambitious restructuring of the nation's armed forces since World War II in the face of a severe economic downturn.
The plan seeks to transform an impoverished, unwieldy conscript army built to fight a protracted war in Europe into a more nimble, battle-ready force that can respond quickly to regional conflicts. Key to the overhaul is a drastic reduction in the number of officers, who now account for nearly one in three Russian servicemen.
By eliminating thousands of officer-only units that were designed to call up draftees in wartime, and moving to a leaner, brigade-based structure, Medvedev intends to cut Russia's officer corps from 355,000 to 150,000, dismissing more than 200 generals, 15,000 colonels and 70,000 majors.
The plan has run into stiff resistance, with some top military officials resigning in protest and the Kremlin firing others. Retired generals and nationalist politicians have accused Medvedev and Prime Minister Vladimir Putin of scaling back Russia's military ambitions by essentially giving up on trying to maintain an army capable of confronting NATO.
Officers and troops have staged scattered demonstrations across the country against the reform plan, which would also shut dozens of military hospitals, schools and research institutes. A top complaint is the government's failure to provide apartments to all officers who are discharged after more than a decade of service -- a benefit that dates to the Soviet era and is written into Russian law.
The apartments are important because military pay has lagged far behind the cost of living and few officers have enough savings to buy homes. But the army has suffered a severe housing shortage since the fall of the Soviet Union, when a wave of servicemen in need of lodging returned to Russia. The military's construction efforts have been plagued by corruption and inefficiency, and hundreds of thousands of active-duty officers as well as retirees are on waiting lists for accommodations.
"Our military organization, our fleet, has cheated me with housing," said Vyacheslav Zaytsev, a former submarine officer who was interviewed on television during a protest in the arctic city of Murmansk. "A homeless officer is a shame for a nation," read one demonstrator's sign.
Here in the coastal province of Primorye, tucked between China, North Korea and the Sea of Japan, as many as 8,000 officers are expected to be discharged in the restructuring, local activists said.
"In our region, over 3,000 officers will be fired from the navy alone. . . . Where will these people go? How will they live?" said Boris Prikhodko, a retired vice admiral, before a protest last month in nearby Vladivostok, the provincial capital and headquarters of the Pacific Fleet.
Under the law, retiring officers can request apartments anywhere in Russia or ask to keep the quarters assigned to them by the military. But in practice, most who have been sent to the Far East have little chance of getting housing anywhere else when they are discharged.
When Primak became eligible for retirement, for example, he asked for an apartment in Kursk, a city near the border with Ukraine, where his parents still live. But he was released without being given any apartment. "I realized then that in Russia there are laws that are enforced, and other laws that are maybe for the future," he said. "What they say on television and do in reality are completely different."
He and other officers in this city of 150,000 say local authorities have fallen behind in housing construction and have begun using loopholes to discharge officers without giving them apartments.
Some have been given certificates that aren't worth enough to buy adequate homes. Others have been relieved of duty but formally remain registered with their units with minimal pay so commanders can keep them on waiting lists.
The worst off are officers stationed in the scores of military garrisons scattered across the countryside here, isolated outposts that have fallen into severe disrepair and are set to be closed as part of the shift to a brigade structure. Many of these officers have been told to just keep their current quarters, which often lack running water.
"These poor guys have to stay the rest of their lives in these ruined garrisons, without even minimal sanitation conditions," said Vladimir Kaplyuk, a retired colonel who heads an aid organization for veterans in Ussuriysk. "But after the units are shut down, there won't be anything left but these officers there. No troops, no jobs, nothing."
Technically, Kaplyuk said, the officers will be on waiting lists for housing. "But for how long?" he said. "Some officers here have been waiting 12 years already."
One 48-year-old lieutenant colonel assigned to a garrison near the Chinese border said he was offered a certificate that would have allowed him to buy only a tiny studio apartment on the outskirts of Ussuriysk or a rural house without a sewer system or running water. When he refused to take it, he was discharged without an apartment and had to sue his commanders to get reinstated.
"I felt like they seized me by the scruff of my neck and threw me away as if I was something useless," said the colonel, a veteran of the war in Afghanistan who asked to be identified only by his first name, Viktor, because he feared reprisals. "I'm upset with everyone -- the state, the commanders -- and there are many people like me facing similar problems."
Officers said it would be difficult for them to unite and pose a serious challenge because they are forbidden from engaging in political activities. They said local authorities have been effective at containing dissent, recently quashing an attempt by discharged officers to stage a protest and arranging for them to gather in a room outside the city instead.
The Kremlin has also pledged to upgrade equipment and weapons and to sharply increase wages for the officers who are not dismissed -- promises that have helped it win support in the military for the reform plan, analysts said.
But most of the planned cuts and dismissals have yet to be completed, and discontent could rise further if the economy worsens, they said.
Alexander Ovechkin, 50, a lieutenant colonel in Ussuriysk who retired without receiving an apartment, said officers are frustrated in part because Medvedev and Putin have raised expectations, repeatedly pledging to build enough housing for all discharged and active-duty officers by next year.
"You can feel the social tension and uncertainty," he said. "They have promised a lot. . . . I'd like to believe it, but my experience is too sad."
New Moscow Proposals Infuriate Russians in Siberia, Far East
May 25, 2009
Paul Goble
Two Moscow proposals last week – President Dmitry Medvedev’s suggestion that China help develop the Russian Far East and a Duma suggestion that Siberian river water be diverted to Central Asia – are adding to the outrage many Russians beyond the Urals feel, as the recent wave of protests in Vladivostok , toward the central government.
In a commentary significantly entitled “The Question: TOGETHER or IN PLACE OF Russia?” Alekandr Protsenko argues that Medvedev’s call for Beijing to invest in the Russian Far East represents a threat to Russia’s territorial integrity, especially since Moscow lacks the resources to do so itself (svpressa.ru/issue/news.php?id=9090#).
Eight months ago, Protsenko points out, Medvedev himself said that “Russia could lose the Far East if it does not take immediate measures for its development.” But now that Moscow’s strategic plan for the region is nearly ready for release, it is obvious Moscow does not have the money to invest there.
Consequently, Medvedev is looking to the Chinese. Their participation, the Russian analyst suggests, “could only be welcomed” if it occurred “TOGETHER” with Russia. But now it is clear that, given Moscow’s budgetary restrictions and plans, Chinese involvement will be “INSTEAD of Russia.”
The difference between the two is fundamental, he suggests, because the population and economy of the regions of China bordering the Russian Federation are booming while the population and economy of the Russian regions involved are in decline, with the latter now amounting to no more than 7.6 million Russian speakers.
And Moscow’s failure to invest in the development of the region overall is highlighted by its willingness to spend enormous sums on preparations for a summit of the Asian Pacific Economic Zone, Protsenko continues, noting that it is building a bridge for that meeting that only 4500 residents might use after it.
Moreover, the new buildings being prepared for this meeting will fall into disuse. There will be space for more students than the Russian Far East can possibly generate, Protsenko suggests. And he asks rhetorically whether Moscow is putting “all its hopes” on the Chinese, something many people in the region would find disturbing.
Adding insult to injury, Siberian news agencies reported last week, the head of the Duma committee on CIS affairs, Aleksey Ostrovsky, has proposed taking up again the idea of diverting Siberian river water to Central Asia in order to boost Moscow’s prestige and influence in the region (news.babr.ru/?IDE=77810).
“Many scholars and certain statesmen,” Ostrovsky said, “have frequently spoken of the necessity of diverting a number of Siberian rivers.” But Siberian commentators have founded out that the Duma leader apparently is unaware of the negative meteorological and climatologic consequences such actions would involve.
Nor does Ostrovsky seem to remember that it was those consequences, as well as the cultural impact of such changes, that led “practically all thoughtful scholars of the Soviet Union” to rise up and, they thought, kill for all time this project which has periodically surfaced over the last 140 years.
On the one hand, experts at Irkutsk’s Babr.ru portal say, any such program will be yet another chance for corruption. But on the other, they conclude, Ostrovsky’s proposal “cannot be assessed as other than a betrayal of the interests of Siberians in the name of doubtful political bonuses” for Moscow.
National Economic Trends
Russia’s GDP reduced by 10.5% in April 2009, thus going down 9.8% for four months of 2009
MOSCOW, May 26 (Itar-Tass) -- Russia’s GDP reduced by 10.5% in April 2009, thus going down 9.8% for four months of 2009, Prime-Tass quoted Deputy Minister of Economic Development Andrei Klepach as saying for reporters on Tuesday.
Deputy finance min sees budget deficit at over 9% of GDP in 2009
MOSCOW, May 26 (Prime-Tass) -- Russia’s federal budget deficit may exceed 9% of the country’s gross domestic product (GDP) in 2009, Deputy Finance Minister Oksana Sergiyenko said Tuesday.
Meanwhile, Deputy Economic Development Minister Andrei Klepach said Tuesday that a significant increase in the budget deficit was expected for 2009, even though the budget deficit amounted to only 0.2% of Russia’s GDP in January-March.
“It was expected that the budget deficit would be at 7.4% of GDP in 2009, but it will be at 8% or even over,” Klepach said.
Under the country’s revised budget for 2009, which approved in late April, Russia’s budget deficit is projected at 7.37% of GDP this year.
Reports: Russian economy could shrink by 8 pct
Associated Press, 05.26.09, 04:14 AM EDT
Russia's economy could shrink as much as 8 percent this year after dropping 9.8 percent in the first four months of 2009, a top economic official was quoted saying by news agencies Tuesday.
Officials had forecast that GDP would decline by 2.2 percent this year, but that estimate is due to be revised after the release of the latest economic figures. The International Monetary Fund has said GDP could drop as much as 6 percent this year - the most pessimistic outlook so far.
Deputy Economic Development Minister Andrey Klepach was quoted by news agencies as saying that the economy contracted by 10.5 percent in April, contributing to the 9.8 percent drop between January and April.
"The GDP decline (this year) will amount to 6 to 8 percent, under our estimates," Klepach was quoted as saying. "We are currently working to make the forecast more precise."
He blamed the weakening economy on declining investment - down 15.8 percent in January-April - and industrial production, which slumped nearly 17 percent in April.
Russia has experienced a sharp reversal of an eight-year economic boom fueled by high oil prices. The economy started to nosedive last fall after oil prices - the backbone of the energy-based economy - collapsed and investors pulled billions of dollars out of the country.
President Dmitry Medvedev warned on Monday that the economy would perform worse than expected this year and the government would have to squeeze spending for the first time in years.
Russia is about to redraft this year's budget to run a bigger deficit than previously forecast.
Deputy Finance Ministry Oksana Sergienko said Tuesday that the deficit could reach 9 percent or more - well above the previous 7.4 percent forecast.
Russian economy contracts 10.5 pct in April
41 mins ago
MOSCOW (AFP) – Russia's economy contracted by 10.5 percent in April against a year earlier, Deputy Economy Minister Andrei Klepach said on Tuesday, quoted by Russian news agencies.
The fall in gross domestic product (GDP) for the first four months of the year was 9.8 percent by comparison with the same period last year, he said.
On a seasonally adjusted basis, GDP declined by 0.4 percent in April compared to March of this year, although this was less sharp compared to the 0.8 percent fall between February and March, he said.
He said the economy ministry was still forecasting an overall decline in GDP for 2009 of six to eight percent, although this might change.
Among other gloomy indicators, he said Russia's trade surplus had halved in April from the same month last year, falling to 7.5 billion dollars from 14.8 billion dollars.
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Russian trade surplus halves in April - Econ Ministry
MOSCOW. May 26 (Interfax) - Russia's trade surplus nearly halved to
$7.5 billion in April 2009, from $14.8 billion the same month last year,
Deputy Economic Development Minister Andrei Klepach told reporters.
Russian exports plummeted an estimated 46.1% to $21.7 billion and
imports fell 44.7% to $14.2 billion, Klepach said.
Russia to have budget deficit of 9% GDP in 2009 - govt source (Part 2)
MOSCOW. May 26 (Interfax) - Russia will have a federal budget
deficit of 9% of GDP in 2009, a government source told reporters.
The previous deficit forecast was 7.4% of GDP, not including
National Welfare Fund assets.
"We're taking a more pessimistic scenario [than the one set down in
the budget], just in case, but the general economic situation could turn
out better," the source said.
The source said the forecast was for GDP to shrink between 6% and
8% this year. Economic Development Minister Elvira Nabiullina herself
has aired these figures.
Kudrin Predicts $50 Oil Next Year
26 May 2009
By Anatoly Medetsky / The Moscow Times
The government is planning to raise budget revenues next year, betting on an oil price of at least $50 a barrel, Finance Minister Alexei Kudrin said Monday.
The figure -- a significant improvement on the prediction of $41 oil for this year's budget -- came immediately after a warning from President Dmitry Medvedev to use more caution in making forecasts because the economy is sliding into a deeper recession than expected.
Medvedev summoned top Cabinet ministers, including Prime Minister Vladimir Putin and Kudrin, to the Kremlin on Monday to urge "conservatism" in economic forecasts and spell out other budget proposals for the next three years.
Putin, who preceded Medvedev as president, leaned back in his chair and looked down expressionlessly, as he often does during Medvedev's speeches. The other ministers sat stiffly in front of their notepads as they listened.
Speaking after the meeting, Kudrin said the $50 oil price was a conservative and tentative prediction. He declined to offer the optimistic forecast.
A barrel of the benchmark Brent blend of oil for June delivery is now worth $59. Russia's main Urals blend, which Kudrin referred to, trades at a discount of some $3 to Brent.
Oil revenues constitute about a third of the country's budget, which prompted the government to revise the budget for the current year after the oil price collapsed in the second half of last year.
The forecast of $50 for a barrel of Urals next year is realistic, said Alexei Kokin, an analyst at investment company Metropol.
Putin, speaking separately at a meeting of the Presidium, a trimmed-down Cabinet, said the government would seek to delay the final draft of next year's budget until Oct. 1. Under the law, it has to be submitted to the State Duma by Aug. 26.
The delay would allow for more precise calculations during the highly volatile economic situation, Putin said. He pointed to oil as one of the elusive factors for determining revenues, saying the price was rising despite the worsening condition of the global economy.
Kudrin, offering the latest estimate of how long the Reserve Fund would last, said it all would be gone next year if the budget deficit reached 5 percent of gross domestic product as planned.
"We will borrow, but we will have to spend it all anyway," Kudrin said, Itar-Tass reported.
He said separately after the Presidium that there was a risk that the government would collect 800 billion rubles ($26 billion) less in revenues this year than planned in the revised budget.
He previously said the fund, which holds most of the money that the government put aside from the record oil revenues in recent years, could cover part of the 2011 spending. The government will deposit money in the fund again later if oil revenues rise, he said Monday.
Russia may borrow $7 billion on the market next year and $10 billion in 2011, but it won't ask the International Monetary Fund for a loan, he said.
The National Welfare Fund, which holds the rest of the oil money savings, will still have some funds left next year, Kudrin said.
Medvedev's budget proposals included a call for greater austerity. He specifically urged the government to refrain from giving pay raises to government-paid employees such as bureaucrats, doctors and teachers. The Cabinet will have to decide over the next three months what other spending it may postpone from the next year, said Arkady Dvorkovich, Medvedev's economic aide.
In a step away from the anti-crisis efforts, Medvedev also urged measures to combat tobacco smoking and alcohol consumption by introducing tax increases that would beat the inflation rate. He said the Cabinet must work to develop the pension system and support the disabled.
At the Presidium, Putin said the government would crack down on the country's offshore zones in order to collect more taxes. "We will, of course, continue a liberal economic policy, but liberalism and swindling are very far from being the same thing," he said, referring to such zones.
Putin proposes postponing submission of draft budget to Oct 1
25.05.06]
(Interfax) Russian Prime Minister Vladimir Putin has proposed postponing until October 1 the date for submitting the draft budget to the State Duma.
"I believe the date for introducing the budget should be moved back to October 1," Putin said at a meeting of the government's presidium on Monday.
Under the current Budget Code, the draft budget is to be submitted to the Duma no later than August 26.
Putin asked the government ministers to discuss the issue with the deputies and senators. The government, he said, had always met its deadlines for introducing the budget to the Duma in the past.
"But the situation in the global markets and in the Russian economy is changing rapidly, and it is hard to predict," Putin said. But for all the general economic gloom, oil prices have picked up in the last month "and the situation in the domestic labor market has also improved," Putin said.
"The Economic Development Ministry is asking for more time to analyze and collate further information, in order to draft a dependable, accurate forecast, and I think this is justified," he said.
The Finance Ministry and profile ministries also want more time to work on the draft budget, he said.
"We need to look for opportunities to make spending more effective, to produce a quality, realistic financial plan, so it would of course be risky to submit the budget draft to the Duma in August, with four months still remaining until the end of the fiscal year," Putin said. (Source: Interfax)
• MAY 26, 2009
Russia Faces Budget Cuts Amid Crisis
By LIDIA KELLY
MOSCOW -- Russian President Dmitry Medvedev painted a gloomy picture of the economy, warning that the deepening global crisis will necessitate deep budget cuts over the next three years.
At a Kremlin meeting, the president instructed Prime Minister Vladimir Putin's cabinet to economize, as Russia's commodity-driven economy deteriorates faster than expected.
"We all understand what a difficult situation the country and the economy are in," Mr. Medvedev said.
Low oil prices, capital outflows, a record drop in industrial production and a two-digit decline in investment have dragged Russia's economy to its worst crisis in a decade.
Gross domestic product shrank 9.5% in the first quarter, though this year's budget is still based on a contraction of 2.2% for the year. The Ministry for Economic Development's new forecast envisages the economy shrinking 6% to 8% in 2009.
Unemployment has reached its highest level this decade, data released Friday showed. The number of unemployed rose to 7.7 million in April, or 10.2% of the total labor force of 75.2 million, according to Rosstat, the Federal Statistics Service. Around three million workers have lost their jobs since late summer.
Kremlin economic adviser Arkady Dvorkovich said Monday that the government should have a better idea of which areas can be cut in the next two to three months. Officials emphasized that spending would have to be reduced next year to help control the deficit -- the first year of reduced expenditures in almost a decade.
Mr. Medvedev called on the government to base the 2010-2012 budget on a conservative assessment of the price of oil -- the chief contributor to government revenue. The conservative scenario is based on prices of $50 a barrel in 2010, $52 in 2011 and $53 in 2012, Finance Minister Alexei Kudrin said.
"The budget deficit will reach at least 7% of gross domestic product" in 2009, Mr. Medvedev said. It would be Russia's first budget deficit in a decade marked by surpluses.
Write to Lidia Kelly at Lidia.Kelly@
Medvedev outlines key points of budget message
MOSCOW, May 25 (Prime-Tass) -- Russian President Dmitry Medvedev outlined the key points of his budget message for 2010-2012 at a government meeting Monday, ITAR-TASS reported.
Specifically, Medvedev named 10 priorities for budget policy: meeting social spending targets, gradually cutting the budget deficit, reducing government spending, seeking efficient ways to prop up the real economy and banking sector, improving the quality of public services, using government purchases as a stimulus for domestic production, determining an "economically justifiable" level of taxation, promoting a responsible approach to government spending, completing the formulation of a reliable pension system, and creating a system for assisting the physically handicapped.
Elaborating on one of the points, Medvedev said that the budget “should become neither a source of financial instability nor a factor contributing to a decline in business activity in the country."
However, the budget deficit is expected to amount to at least 7% of gross domestic product (GDP) in 2009 under "an optimistic forecast," he added.
Medvedev also said that he believed budget policy should be based on conservative forecasts of energy prices and that the government could not afford to risk relying on optimistic forecasts.
"Of course, (energy) prices may turn out to be higher, but we don't have the right to take such a risk," he said.
According to a copy of the budget message obtained by Prime-Tass on Monday, Medvedev set a goal of increasing pensions for those who had been officially employed to two and a half times the living wage by 2024.
The official monthly living wage for pensioners currently amounts to 4,294 rubles.
In the message, Medvedev also proposed setting up regional stabilization funds in regions whose economies are dominated by a single industry in order to mitigate the effects of economic downturns in such locales.
Outlining his proposals on taxation, Medvedev suggested deducting corporate expenditures on transport and utilities infrastructure from companies’ taxable income, increasing the share of corporate interest payments that are deductible from taxable income, and introducing tax incentives for energy efficiency.
Medvedev also reiterated that the government would allow companies whose revenues amount to less than 60 million rubles per year to switch to a simplified taxation regime that reduces the tax burden on small businesses. At present, the threshold is set at 30 million rubles.
Additionally, Medvedev called on businesses to channel a larger part of their profits to dividend payouts, as opposed to spending them on executive pay. He said that higher dividends would make companies more attractive for investors.
Commenting on the budget message, presidential advisor Arkady Dvorkovich said that the government might borrow on the domestic market and subsequently from abroad.
Dvorkovich also that said no drastic changes in taxation policy were expected in the upcoming years.
Dvorkovich reiterated that the unified social tax would be replaced with social insurance payments in 2011 and said that these payments would be hiked in 2011. He added, however, that social insurance payments for some businesses would not be increased until 2015.
Budget address prioritizes domestic over external borrowing – Kremlin aide
MOSCOW. May 25 (Interfax) - The Russian president's budget address
prioritizes domestic borrowing over external borrowing, presidential
aide Arkady Dvorkovich told reporters.
"It envisions higher government borrowing, mainly on the domestic
market and, when the situation improves, on the external markets,"
Dvorkovich said.
Dvorkovich said "borrowing of several hundred billion rubles is at
issue."
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Russian budget deficit to make up 7.4% of GDP in 2009, 5% in 2010, 3% in 2011
MOSCOW. May 25 (Interfax) - The Russian government forecasts the
budget deficit will amount to 7.4% of GDP in 2009, although it expects a
considerable decline in the deficit over the following two years, Deputy
Prime Minister and Finance Minister Alexei Kudrin said.
"We expect the budget deficit to make up 5% [of GDP] in 2010 and 3%
in 2011. This is a serious goal that requires higher efficiency for the
return on each ruble and a significant adjustment in budget
expenditures," Kudrin told journalists on Monday following a meeting on
the president's budget address.
Russian budget deficit to make up 7.4% of GDP in 2009, 5% in 2010, 3% in2011 (Part 2)
MOSCOW. May 25 (Interfax) - The Russian government forecasts the
budget deficit will amount to 7.4% of GDP in 2009, although it expects a
considerable decline in the deficit over the following two years, Deputy
Prime Minister and Finance Minister Alexei Kudrin said.
"We expect the budget deficit to make up 5% [of GDP] in 2010 and 3%
in 2011. This is a serious goal that requires higher efficiency for the
return on each ruble and a significant adjustment in budget
expenditures," Kudrin told journalists on Monday following a meeting on
the president's budget address.
Russian presidential aide Arkady Dvorkovich, for his part, noted
the importance of consolidating the work of all branches of the
government, regional authorities, municipalities and business in the
current conditions.
"This consolidation is critically important today. Otherwise, it
won't be realistic to modernize and technologically renovate the
economy," he said.
Dvorkovich stressed that the entire budget should be aimed at
raising the efficiency of the economy. The government has the mechanisms
to do this, including anti-crisis measures to support companies, he
said.
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Russia may borrow over $7 bln abroad in 2010 - Kudrin (Part 2)
MOSCOW. May 25 (Interfax) - Russia's external borrowing in 2010 may
top $7 billion and subsequently rise to $10 billion, Deputy Prime
Minister and Finance Minister Alexei Kudrin told journalists.
'We plan to return to external borrowing in 2010. It will exceed $7
billion that year," Kudrin said after a meeting with the president on
the budget address.
"Subsequently that could rise to $10 billion," Kudrin said.
"We do not plan to borrow from the IMF," he said.
"Russia has good opportunities for borrowing on the market. It will
be timed with the market situation in view," he said.
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Russian govt approves tax policy for 2010-2012 – Kudrin
MOSCOW. May 25 (Interfax) - The Russian government has approved the
main parameters of its tax policy for 2010-2012, said Deputy Prime
Minister and Finance Minister Alexei Kudrin at a briefing following a
governmental session in Moscow on Monday.
"The program has been approved in the same version in which it had
been submitted," he said.
He added that instructions had been given to solve the issue of
indexing the subsoil tax on gas starting from 2010.
In addition, efforts will be made for a possible compensation on an
increase in the tax burden owing to rising rates on insurance premiums
starting from 2011.
Budget windfalls could still fall short of 2009 budget calculations –Kudrin
MOSCOW. May 25 (Interfax) - The risk of not receiving full
windfalls for the 2009 budget are still present, said Finance Minister
Alexei Kudrin at a briefing in Moscow.
At the briefing Kudrin commented on an earlier announcement from
Deputy Minister Tatyana Nesterenko, who said that the Federal Tax
Service and Federal Customs Service had estimated total windfalls for
2009 at 800 billion rubles less than what has been factored into the
adjusted budget for the current year.
"[We have] these estimates and they have not changed that much,"
Kudrin said.
Business, Energy or Environmental regulations or discussions
Russian Stocks Fall as Ruble Drops Most in Month; VTB Slides
By William Mauldin
May 26 (Bloomberg) -- Russia’s Micex Index fell for a second day, led by banking shares as the ruble declined the most against the dollar in more than a month.
OAO Sberbank and VTB Group led the declines after brokers downgraded the country’s biggest banks. OAO Gazprom, the world’s biggest natural-gas producer, dropped for a second day as oil futures retreated.
The 30-stock Micex fell 2.5 percent to 1,025.09 at 12 p.m. in Moscow. The dollar-measured RTS Index sank 1.8 percent to 1,000.08. The Russian Depositary Index, a measure of global depositary receipts trading in London, decreased 3.9 percent.
UniCredit SpA cut its recommendation on Sberbank’s common and preferred shares to “hold” from “buy,” predicting the company will post a $183 million loss this year and have “large-scale” capital needs.
“The bank needs new capital to continue lending to the real economy in order to meet its social obligations mandated by the government,” wrote Rustam Botashev, banking analyst at UniCredit in Moscow, in a report distributed to investors today. “The bank would also need new capital if it decides to take over BTA, which we would see as negative.” BTA Bank is Kazakhstan’s biggest lender.
Sberbank fell 2.6 percent to 38.38 rubles on the Micex Stock Exchange, its first decline since May 21. The bank’s preferred shares tumbled 7.3 percent. Smaller rival VTB declined 2.2 percent to 4.32 rubles.
Gazprom, Lukoil
Alexei Ulyukayev, a member of Sberbank’s supervisory council and the first deputy chairman of the central bank, said last week that Sberbank won’t need to sell shares this year, the Interfax news service reported then. Chief Financial Officer Anton Karamzin said the same day that the bank may post a “small loss” this year under Russian accounting standards.
Deutsche Bank AG downgraded VTB to “sell” from “hold,” saying “loans are souring, leading banks to accumulate bad loan provisions,” the German bank said in a note dated yesterday.
Banking shares also suffered as Russia’s ruble slipped against the dollar for the first time since May 14, a move that makes Russians more likely to withdraw or convert deposits, removing a major source of funding for lenders. The currency fell 1 percent against the dollar to 31.3064, the biggest decline since April 20.
“Oil is now looking vulnerable, and that is making investors nervous about both the currency and equities,” said Chris Weafer, chief strategist at UralSib Financial Corp.
Crude for July delivery fell 1.7 percent to $60.61 a barrel in after-hours trading in New York. Gazprom, Russia’s biggest energy producer, dropped 2.2 percent to 166.95 rubles, the lowest in seven days. OAO Lukoil, the country’s second-biggest oil producer, sank 2.6 percent to 1,508.09 rubles.
OAO Polymetal, Russia’s biggest silver producer, climbed 12 percent to 263.93 rubles, heading for its biggest gain since Jan. 11. The stock enters the MSCI Emerging Markets Index after the close of trade on May 29.
To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@
Last Updated: May 26, 2009 04:23 EDT
VTB Group, Russian State Bank, Wins Kazakh Banking License
By Denis Maternovsky
May 26 (Bloomberg) -- VTB Group, Russia’s second-biggest lender, received a license to start offering banking services in Kazakhstan.
VTB’s Kazakh unit will have $50 million in charter capital and initially concentrate on servicing corporate clients, the state-run lender said in an e-mailed statement dated yesterday.
To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@
Last Updated: May 26, 2009 01:44 EDT
Deripaska nears deal to retain empire –WSJ
Mon May 25, 2009 9:13pm EDT
NEW YORK, May 25 (Reuters) - Russian tycoon Oleg Deripaska is close to agreements to restructure his companies' multi-billion-dollar debts, The Wall Street Journal reported on Monday, citing an interview with a senior official within Deripaska's Basic Element holding group.
Such agreements should allow Deripaska's empire to survive without losing control of its major assets, the paper cited the official as saying.
"We're now in the position where, except for a few difficult situations, we think the businesses will make it," Olga Zinovieva, first deputy chief executive of Basic Element told the paper.
"The acute phase is past, and if we sign binding documents with creditors, the situation will be normalized and the businesses will get through it calmly," the paper quoted Zinovieva as saying.
Basic Element, or Basel, controls assets including United Company RUSAL, the world's top aluminum producer, auto maker GAZ (GAZA.RTS: Quote, Profile, Research, Stock Buzz), several energy, construction, aviation and insurance firms, and other companies.
Basic Element told Reuters in April that Deripaska would ask lenders for another two to five years to repay debts incurred by companies within the holding group, and said the total debt accumulated by those companies in which Basic Element owns a stake was about $20 billion. (Editing by Leslie Adler)
Norilsk Posts $555M Loss on Write-Down
26 May 2009 Combined Reports
Norilsk Nickel posted its first full-year loss in at least 11 years after taking a $4.7 billion write-down on assets including mines and plants outside Russia, the company said Monday in an e-mailed statement.
The world's biggest nickel producer lost $555 million in 2008, compared with a net income of $5.33 billion a year earlier, Norilsk said. The company's revenue for 2008 dropped by 18 percent to $14 billion because of the impairment charges. Metal sales were down 26 percent to 11.8 billion on the significantly lower nickel prices.
Norilsk, which exports more than 80 percent of its nickel, also reported a foreign exchange loss of $397 million in 2008 compared with a $146 million gain in the year earlier. Norilsk redirected some of its sales from Europe to Asia, sending only 51 percent of the production to Europe in 2008, down from 63 percent in the year earlier.
The company said impairment of nonfinancial assets amounted to $4.7 billion in 2008, compared with $1.88 billion in 2007.
The impairment charge included $2.48 billion on assets acquired when Norilsk bought Canada's LionOre Mining International. The miner agreed to pay 6.8 billion Canadian dollars ($6 billion) for LionOre in May 2007, the same month that nickel traded at a record $51,800 a ton in London. The metal has plunged 65 percent since then, and Norilsk has written down the LionOre assets' value by $5.7 billion.
Norilsk bought LionOre to access its Activox technology, which helps produce metal from low-grade ore, and to gain mines in Australia, South Africa and Botswana. Norilsk ended the Activox project in Botswana in June, saying it was not economical.
Norilsk's African unit was operating at "virtually zero profitability" after production costs reached $10,000 a ton, the company said in February. It may sell its Australian mines, Norilsk's independent director Brad Mills said last week.
Norilsk's adjusted earnings before interest, taxes, depreciation and amortization were down 43 percent to $5.8 billion, the company said in the statement. The company's total debt decreased to $6.4 billion, from $8 billion. Of that sum, $872 million must be repaid this year, the company said in the presentation on its web site.
Norilsk had $2 billion in cash and cash equivalents as of Dec. 31, 50 percent less than a year earlier.
The company's shares closed down 2.3 percent to 3,323.42 rubles in Moscow trading.
Norilsk Nickel's biggest shareholders are Interros, Vladimir Potanin's investment vehicle, and United Company RusAl, the world's largest aluminum producer, controlled by Oleg Deripaska.
TMK board approves dividend for 2008
Tuesday, 26 May 2009
TMK, one of the world’s largest oil and gas pipe producers announces recommended 2008 dividends amount.
The OAO TMK Board of Directors has recommended that shareholders approve a 2008 dividend of RUB 1.44 per share. The total amount of dividend to be approved at the Annual General Meeting of Shareholders is RUB 1,257,121,440.
TMK management currently has no plans to pay interim dividend for 2009.
The list of shareholders eligible to participate in the Annual General Meeting of Shareholders and entitled to dividends for 2008 was drawn up on May 21st 2009. The AGM will be held on June 30th 2009 in Moscow.
Additionally, the OAO “TMK” Board of Directors recommended members of the Board of Directors and members of the Internal Audit Commission for shareholder approval as well as approved the AGM agenda.
TMK Seeks EBRD Loan
TMK is in talks with the European Bank for Reconstruction and Development on a $200 million loan, Vedomosti said Monday, citing an unidentified person familiar with the negotiations.
Vladimir Shmatovich, vice president of strategy, said May 16 in London that the company was talking with the EBRD, without specifying the amount of the loan. The pipe maker's board also recommended a dividend of 1.44 rubles per ordinary share for last year, according to an e-mailed statement from TMK on Monday. (Bloomberg)
Russian mobile retailer Yevroset forced to leave post-Soviet markets
Today, 12:17 PM
Yevroset, a major Russian and CIS mobile phones retailer, continues its escape from the post-Soviet market: having already left the Baltic countries, Uzbekistan and Azerbaijan, Yevroset has announced it is leaving Moldova and Armenia, and may also close operations in Belarus and Kyrgyzstan, Russian Kommersant daily writes Tuesday.
Yevroset’s president Alexander Malis called entering these markets a strategic mistake.
“Former shareholders thought that the wider the territorial coverage of a network, the higher its value. But we think that a company’s value depends on its profits,” he told Kommersant.
The company did not make public its profits in Belarus, Kyrgyzstan, Armenia and Moldova, but said that the share of earnings in Armenia and Moldova only reached 1 percent in the company’s overall profits, in spite of Evroset occupying 10 to 20 percent of the two states' markets.
Yevroset was the first Russian mobile phones retailer to enter the post-Soviet markets when in 2004 it opened its stores in Ukraine and Kazakhstan. In 2005, Yevroset launched operations in Belarus, and in 2006 in Kyrgyzstan, Uzbekistan, Moldova, Baltic states, Armenia, Georgia and Azerbaijan.
Since then, Yevroset has been gradually closing down its stores in the CIS.
Yevroset owns 3,790 mobile phone and accessories stores in Russia. Since last autumn, 50.1 percent belongs to Russian businessman Alexander Mamut and 49.9 percent to Vympelcom, Russia's number two mobile phone operator.
The company's reputation was shattered when its former owner, Yevgeny Chichvarkin, was found guilty of assisting the illegal trafficking of mobile phones and accessories via the Yevroset stores, and sentenced to nine years at a maximum security penal colony.
Sainsbury Mulling Russia
J Sainsbury, Britain's third-largest supermarket chain, may open stores in Russia, Kommersant reported, citing an unidentified Russian retailer.
Top officials of the company last week met with representatives of Russian supermarket operators, including X5 Retail Group, the newspaper said.
Sainsbury may make a decision within three months, Kommersant said. Goldman Sachs Group is advising the British chain on its expansion plan, the newspaper added. (Bloomberg)
AFI Development First-Quarter Net Rises Sixfold on Revaluation
By Brad Cook
May 26 (Bloomberg) -- AFI Development, billionaire Lev Leviev’s Russian property company, said profit in the first quarter jumped sixfold on a revaluation gain related to new accounting rules.
Net income reached $416.8 million from $68.8 million in the same period last year, AFI said in a regulatory statement today. Revenue almost tripled to $17 million from $5.8 million.
Last Updated: May 26, 2009 02:06 EDT
Moscow Real Estate market awaiting a summer signal
26 May, 2009, 11:20
The extent to which Moscow real estate prices have subsided since their peak depends largely on what currency buyers and sellers are thinking in terms of, with analysts divided in their views on the outlook.
After a three year property boom, fuelled by a buoyant economy, crude prices which reached a peak in July 2008, and a population boom which has some experts quoting Moscow’s population well above its official census of 12 million, the last 6 months have been like a bucket of ice water on Moscow’s property investors.
Prices Down: But by how much?
The impact of the global financial crisis on the nascent Russian mortgage lending market, the economic downturn which has followed, coupled with the slump in prices for most of Russia’s commodity exports, have combined to push prices lower. Although the extent to which they have dropped is a matter of debate.
With widespread reports of a major slump, Dmitry Taganov, Head of the Analytical centre at Incom says most of the fall stems from the devaluation of the Russian Rouble against the U.S. dollar in the last quarter of 2008 and first quarter of 2009. He says that falls when expressed in Rouble terms have been much less.
“The whole world today says the price for accommodation in Russia has fallen, which is absolutely wrong. In fact, we do have a drop of about 30% in dollar terms. But we should remember that in our country all payments are effected in Roubles. So, with the Rouble devaluation of those 25% – 30% mentioned, we have just a slight fall of 1-2% in Rouble terms which is natural after the pick we had last August.”
Vladislav Lutskov, CEO of Analytical Consulting Centre MIEL is seeing a bigger fall in Rouble terms for existing apartments, but is drawing a clear distinction between what is happening with this (the secondary) housing market, and what is happening in the primary market for newly constructed homes.
“In fact, the situation in primary and secondary housing markets differs. Rouble prices for new apartments in Moscow haven't changed much since the beginning of the crisis – rising only 4% – whereas existing homes have become almost 12% cheaper. This figure includes homes of different quality. So, prices for cheap homes have fallen the most, down 11.3%, and standard housing and premium housing falling less.”
Lutskov also notes that the extent of price falls varies between Moscow regions, with regions such as the Zelenogradsky administrative area down 16.5% on average, areas close to the Moscow Ring Road (MKAD) such as Brateevo and Solntsevo down 13% and 14% respectively, and the declines being much less in areas closer to the centre. Despite the falls in prices, he notes that prospective sellers aren’t taking their apartments off the market, with numbers of existing apartments for sale at a 2 year high, and new apartment numbers for sale remaining steady.
“The fall in prices for existing homes didn't make sellers take their apartments off the market. Quite the opposite, the supply today is the biggest in two years, with currently about 47000 flats on sale. As for primary market, the volume of supply has remained stable since the beginning of the crisis with between 295-310 thousand new homes available.”
Lutskov isn’t expecting a rapid recovery in housing demand and prices, but believes the outlook will become clearer later in the summer. Dmitry Taganov, from Incom also believes that the number of apartments changing hands is relatively stable, and expected to remain so for the short term.
“As for the number of new contracts, it has become stable now after the growth in the first quarter. Today it's neither falling nor growing and we expect the same situation till mid summer.”
Data from the Federal Registration Service indicates that sales contracts for apartments increased from 4626 in January-February 2009 to 9124 in March-April. Interpretations of this tend to fall into two clear groups. On the one hand there are those seeing buyers looking to get into the market before it picks up again, and others seeing a rise in ‘alternative’ contracts – swapping apartments, in largely non cash transactions, by those searching for cheaper accommodation.
Mortgage Availability
A key factor is the availability of mortgages. Prior to the downturn an estimated 20-25% of property transactions across Moscow involved mortgages, with the figure rising to as high as 80% in some regions.
Its here that the credit crunch has had a major impact with the number of mortgages being made available, as well as being sought, falling in the new year. A number of lenders have stopped making available loans to prospective applicants, reflecting their difficulties on accessing funding, as global lending markets dried up. Coupled with this has been the major impact on the financing of major property developers, making some lenders more wary of lending for properties on the primary market. Tamara Polyanitsina, a senior Vice President of Rosbank, believes that underlying demand remains, but that the capacity of banks to offer loans, and worries on the part of applicants about the economic outlook are key factors.
“Today Rosbank, as well as most other banks, has ceased giving mortgage loans for new homes. We give loans for the purchase of existing homes but uncertainty is still there in both markets. Of course, one of the main problems today is people’s uncertainty about their future income. But still there are people with money, solvent demand remains.”
Mikhail Shlemov, banking sector analyst for VTB Capital, says demand for loans for primary housing fell in 1Q 2009. He says tightened lending standards from those banks still making loans at available prices, coupled with the economic outlook, and prices which are still relatively high have contributed to the downturn.
“Actually, there are three main reasons for the fall in the number of given mortgage loans. Firstly, it's a higher price for primary housing. Far less people today can afford a new apartment at such high prices. Now banks are mostly involved in working with the contracts concluded before the crisis. Secondly, the initial installment has risen significantly – to around 30% of the total sum in many cases. This increase is a part of the tighter monetary policy of the Russia's Central Bank. It has raised the interest rate in an attempt to fight inflation. As a result, the cost of funding itself has increased significantly, pushing the credit rate up. Thirdly, there’s the decline in peoples' income. This factor has a dual nature. On the one hand, it reduces natural capacity of people in the street to buy flats. On the other, it makes banks more cautious. They have introduced various measures to be sure they get money back, such as more stringent income assessments for applicants.”
The Outlook
The outlook for prices is expected to reflect the wider economy, with an economic rebound expected to drive prices higher, but further signs of a protracted economic downturn likely to see further falls in property prices. The latter view is giving rise in some quarters to thoughts of a ‘second bottom’ for the housing market, with potential for prices to fall further should the economic outlook deteriorate. Support for this view stems largely from the slump in energy prices (which account for the bulk of Russia’s export earnings) and the value of the Rouble to levels last seen about 3-4 years ago, when housing prices were significantly cheaper.
Those disagreeing with the theory note that changes in the market since the early 2000’s, with the focus turning away from new apartments (which have declined from 70% of the housing sector to about 30% now) towards the secondary market, and the change in new apartment construction from cheaper accommodation to premium quality apartments, means that there is unlikely to be major further falls. Tamara Polyanitsina from Rosbank, agrees that some potential buyers are waiting to see if prices fall further, but she thinks another key factor is potential sales by cash strapped property developers to State organizations change the supply balance in the wider market.
“Some are just waiting for that much debated second bottom in house prices. Whether the prices will go down or remain at the existing level depends on the supply. Currently, Russia’s biggest construction companies like PIK, for example, are holding talks with Government, namely the Ministry of Defense and the Ministry of Regional Development. If construction companies do sell their stock of ready apartments to Government, the number of flats on sale will be much lower with the demand remaining the same or even going up.”
Activity in the Oil and Gas sector (including regulatory)
Gas Output May Fall 20%
ROME -- Russia's gas output is expected to fall 18 percent to 20 percent this year, but the decline may be smaller because of seasonal reasons, Energy Minister Sergei Shmatko said Monday.
"So far, we are expecting a fall of 18 to 20 percent compared to 2008," Shmatko said. "But I think this fall could be reduced thanks to an increase of pumping gas in the storages."
Gazprom expects to post up to an 18 percent drop in output this year to 450 billion to 510 billion cubic meters of gas. (Reuters)
** Kazakh state energy firm KazMunaiGas [KMG.UL] may sell a stake in the Pavlodar oil refinery to Russia's Gazprom Neft (SIBN.MM) or TNK-BP, sources close to the talks said. [nLP144316]
Gazprom Neft, TNK-BP eyeing Kazakh refinery – sources
Mon May 25, 2009 3:06pm BST
By Masha Gordeyeva and Katya Golubkova
ALMATY/MOSCOW, May 25 (Reuters) - Kazakh state energy firm KazMunaiGas [KMG.UL] may sell a stake in the Pavlodar oil refinery to Russia's Gazprom Neft (SIBN.MM: Quote, Profile, Research) or TNK-BP, sources close to the talks said on Monday.
KazMunaiGas plans to buy the refinery from MangistauMunaiGas, a private oil producer, and then sell a large minority stake to a Russian company that can provide it with oil from Siberia, one of the sources said.
"KazMunaiGas must keep the controlling stake," a government source said.
The Pavlodar refinery, built in Soviet times, is linked to pipelines in neighbouring Russia rather than to Kazakh ones. It can process up to 7.5 million tonnes of oil a year.
A banking source in Russia confirmed that Russian firms were eyeing the refinery.
"Several Russian companies including Gazprom Neft have expressed interest in the Pavlodar refinery," the source said. "I have also heard of interest from TNK-BP."
A spokesman for TNK-BP, part-owned by Britain's BP (BP.L: Quote, Profile, Research), said his company was "looking at all assets on the market that could increase its value".
Gazprom Neft, the oil arm of gas giant Gazprom (GAZP.MM: Quote, Profile, Research), declined to comment on the matter. KazMunaiGas did not answer a written request for comments.
Kazakhstan produces about 70 million tonnes of oil a year and exports most of it. Its three refineries mostly serve the domestic market. (Reporting by Masha Gordeyeva in Almaty, Olga Popova and Katya Golubkova in Moscow; Writing by Olzhas Auyezov, editing by Will Waterman)
MAY 26, 2009
BP Nominates Head for Russian Venture
By GUY CHAZAN and GREGORY L. WHITE
BP PLC said it nominated Pavel Skitovich, the former head of Russia's largest gold miner, as its candidate for the post of chief executive of TNK-BP Ltd., its Russian joint venture.
The move could finally bring to an end the protracted search for a successor to Robert Dudley, the former CEO of TNK-BP who fled Russia last summer complaining of harassment.
BP and its partners in the 50-50 joint venture, a group of Russian billionaires, agreed last year to appoint an independent CEO to succeed Mr. Dudley as part of a deal to resolve a bitter dispute that rocked the company, Russia's third-largest oil producer. But the search took longer than expected after talks with the preferred candidate broke down over compensation.
In the interim, Tim Summers, a former BP executive who had been chief operating officer at TNK-BP, served as acting CEO. But Mr. Summers's contract expires on June 1, and BP and the Russian shareholders have said they want a permanent executive in place as soon as possible.
Under the terms of the TNK-BP shareholder agreement, BP nominates candidates for CEO, subject to approval by both partners. Mr. Skitovich for years has worked at Interros, the investment vehicle of Russian billionaire Vladimir Potanin, and was head of Polyus Gold, a big Russian gold miner, for a few months in 2007.
But he lacks experience in the oil industry. A person close to BP acknowledged that could be a concern for both partners and that to resolve it, the partners could come up with an interim arrangement under which Mr. Skitovich would be "tried out" under an acting CEO "to see if he fits in." The person said the acting chief executive could be Mr. Summers or another top executive at the company.
A potential candidate for that role is Viktor Vekselberg, who heads TNK-BP's natural-gas business and owns the Renova industrial group.
BP might be reluctant to countenance Mr. Vekselberg in the role of TNK-BP chief executive, even on an interim basis. Last year BP officials criticized the management roles of Mr. Vekselberg and German Khan, another Russian shareholder, saying they undermined governance at TNK-BP.
People close to both sides said the discussions are cooperative, without any sign of the tensions that marred the relationship between BP and its Russian partners during last year's conflict.
Write to Guy Chazan at guy.chazan@ and Gregory L. White at greg.white@
BP moves to settle TNK clash
By Isabel Gorst in Moscow
Published: May 25 2009 19:24 | Last updated: May 25 2009 19:24
BP nominated a Russian businessman as its candidate to serve as TNK-BP‘s chief executive, which it hopes will mark the end of the bitter dispute over management of its Russian oil joint venture.
Pavel Skitovich, a director of Interros, the investment company controlled by Vladimir Potanin, was put forward as BP’s choice to head TNK-BP after a six-month search.
BP said: “We have formally nominated Pavel Skitovich. He is a strong candidate and we think he is the right person for the job.”
The move came after Vedomosti, the Russian business daily, reported that TNK-BP’s board might nominate Viktor Vekselberg, the company’s executive director, as chief executive at its next meeting in June.
The Vedomosti report reignited investor concerns that Russian shareholder managers have taken control of TNK-BP in the wake of the dispute with BP.
BP won the right to nominate an independent, Russian-speaking candidate to run TNK-BP as part of a peace settlement last year. The appointment requires approval from Russian shareholders and the TNK-BP board.
Mr Vekselberg, who owns a 12.5 per cent share in TNK-BP, does not qualify as an independent candidate.
Robert Dudley, the long-standing chief executive of TNK-BP, was forced out late last year after Russian shareholders complained that BP managers wielded too much control at the company.
Tim Summers, TNK-BP’s former chief operating officer, has been serving as chief executive since Mr Dudley stepped down. Russian shareholders are keen that Mr Summers, who was originally hired from BP, leaves the post when his contract ends in June.
German Khan, executive director of TNK-BP, has said the new chief executive should be dedicated to the company and not just taking “another step on the career ladder”.
Analysts said BP, which relies on TNK-BP for one quarter of its global oil production, was unlikely to pick a fresh quarrel with the Russian shareholders by proposing a candidate they would reject.
Julia Nanay, a senior director at PFC Energy, said: “Anyone who BP puts forward is likely already to have some level of approval from the Russian shareholders.”
Several candidates in the running for the post are understood to have dropped out because of concern that Russian shareholders held too much power.
Copyright The Financial Times Limited 2009
Russia finds growing competition for Central Asia's oil and gas
Nicholas Watson in Prague
May 26, 2009
Russia's command of its so-called "near abroad" has been more or less complete over the past few years as the EU has floundered to find a coherent strategy to counter Moscow's dominance there, especially in the energy sphere. But recent oil and gas deals in Central Asia show the Kremlin's grip is loosening.
Russia's hold over Central Asian gas exports appeared to have been reinforced in the spring of 2008 when, after years of buying gas from there on the cheap, the state-controlled Gazprom agreed with the three former Soviet states of Kazakhstan, Turkmenistan and Uzbekistan to pay them European prices for their gas on long-term contracts, rather than see those producing countries sell their gas directly to Europe and thus break its stranglehold on exports to the continent.
Gazprom needs Central Asian gas to help cover demand in Russia and support its 150bn cubic metres a year (cm/y) export business to Europe, which runs via Ukraine. Central Asian imports partly compensate for production falls at Gazprom's large fields in western Siberia and allow the company to delay hugely expensive projects in the Arctic Yamal peninsula, such as the technically challenging Shtokman gasfield development in the Barents Sea. Among Russian projects in Central Asia, Gazprom is drilling some 20 exploration wells in the Ustyurt region of Uzbekistan, where gas reserves are estimated to amount to about 1 trillion cm. Gazprom has agreed to invest $400m exploring in the region before the end of 2011. Lukoil was also planning to produce 2.7bn cm of gas this year from its Kandym-Khauzak-Shady production sharing agreement (PSA) in Uzbekistan, which came on stream in 2007, though the crisis may reduce that amount.
Alongside the supply deals, Gazprom, essentially an arm of the Kremlin, has pursued a tandem policy of controlling the export infrastructure by agreeing to expand its pipeline links with Central Asia. The Soviet-built Central Asia-Center pipeline, the only large export outlet for gas from the region, is to be expanded under a deal signed with the three aforementioned Central Asian states. Separately, Russia, Kazakhstan and Turkmenistan are planning a second pipeline that would skirt the Caspian Sea to carry 20bn cm/y northwards from 2012.
Fast-forward a year from that gas supply deal and things look a little different. Gazprom is smarting from the global economic crisis. On April 29, Gazprom released figures that showed its net profit in the fourth quarter plunged 84% from the previous year to RUB37.5bn ($1.1bn) as the company struggled with sliding demand for its exports and the fall in the ruble against other currencies. Analysts say this demand picture has continued to worsen this year, estimating that gas exports fell by as much as 57% in the first quarter; consumption in Russia is down by about 5%.
Despite rising transit costs and falling consumer demand in Europe and Russia, Gazprom still has to buy the gas contracted from Central Asia at the agreed higher prices, essentially paying a fee for the monopsony it holds over the exports from there. This year, Gazprom will import about 50bn cm of Turkmen gas, 15bn cm from Uzbekistan and less than 10bn cm from Kazakhstan. Jonathan Stern, head of gas research at the Oxford Institute of Energy Studies, reckons Gazprom will have trouble absorbing the 50bn cm of gas it has contracted to import from Turkmenistan.
And Uzbekneftegaz, the state-run oil and gas monopoly in Uzbekistan, said in May there will be no let-up in its plans to increase its gas exports this year despite the lower prices and weaker demand. Shavkat Majidov, the company's first deputy chairman, told participants at an oil and gas exhibition in Tashkent in May that Uzbekneftegaz had increased its gas exports by 7% on year in the first quarter and would "maintain this dynamic" for the remainder of the year. Majidov said that Ukzbekistan plans to increase its export total to 16.2bn cm this year, of which 15.2bn cm will be sent to Russia under an agreement with Gazprom. The remainder of Uzbekistan's gas exports will be sent to Kazakhstan, Tajikistan and Kyrgyzstan.
All this is putting a strain on Gazprom's finances and, although bullish in the long term, the company is having to scale back on some of its plans in the shorter term.
A blast
On May 13, the president of Kazakhstan, Nursultan Nazarbayev, signed a law approving the construction of that additional gas pipeline to Russia, which will carry another 20bn cm/y of Kazakh and Turkmen gas. Russian officials say this pipeline should come on stream by March 2010, a year before construction is scheduled to start on the EU's Nabucco pipeline, which is competing for the same gas to send to Europe only without it having to cross Russian soil. However, the Russian pipeline's cost and precise construction plan remain unclear. And in March, Turkmenistan's president, Gurbanguly Berdymukhamedov, signed several economic agreements during a three-day visit to Moscow, but left without finalising plans to build this pipeline, which was to have formed the centrepiece of the summit.
Neither side disclosed the reasons behind the failure to sign anything on the pipeline, though a more public spat broke out in April when an explosion damaged the pipeline that runs from Turkmenistan's giant Dauletabad gasfield, which delivers gas to Russia via Uzbekistan. Ashgabat blamed the explosion on Gazprom's unilateral decision on April 8 to cut the volume of deliveries, leaving the Turkmen side insufficient time to relieve the extra pressure in the pipeline, thus causing the rupture. Moscow blamed the blast on technical faults on the Turkmen side or simply the worn-out condition of the pipeline, but President Berdymukhamedov has, in an unprecedented move, demanded an international investigation and even compensation from Gazprom.
Then, on April 16, the German utility RWE, one of six shareholders in the Nabucco project, announced that its CEO, Juergen Grossmann, had signed in Ashgabat a memorandum on long-term cooperation in the gas sphere. "Amongst other things, the parties have agreed upon investigating and discussing first direct deliveries of natural gas from Turkmenistan to Germany and Europe. RWE will also engage in the exploration and development of natural gas resources in Turkmenistan’s western Caspian Sea," the company said in a statement. According to officials at the signing event, Turkmenistan has assigned its offshore Bloc 23 to RWE as an initial step, with further blocs possibly to be awarded later on. Exploration work is expected to start later this year. RWE will also provide technical training for Turkmen specialists, a group of 20 of which arrived in Germany in April.
Though analysts said this deal could simply be part of Ashgabat's efforts to strengthen its bargaining position with Russia, the Economist Intelligence Unit notes that, "this is the nearest any Western investor has come to a PSA since the president, Berdymukhamedov, came to power in December 2006."
Indeed, Turkmenistan's government has talked a lot since Berdymukhamedov took over from the unlamented dictator Saparmurad Niyazov about opening up the country more to western investment. In May, Reuters quoted a government official as saying that Turkmenistan expects foreign investment in its energy sector to double this year to $4bn. Until now, though, there have only been talks held with western companies such as Chevron and BP over deals to develop the Turkmen sector of the Caspian Sea, while the only PSAs that have been agreed are with the Gulf-owned Dragon Oil and the Malaysian state energy firm Petronas, as well as deals with Russia, China and Iran. "Very few actual development deals have been agreed and finalised since Berdymukhammedov took power, and Turkmenistan disappointed many potential investors last year when the government indicated that it planned to develop the super-giant South Yolotan field — believed to be one of the five largest gas fields in the world — without assistance from foreign companies," says Andrew Neff of Global Insight.
Uzbekistan too is looking beyond Russia to develop its energy resources. On May 11, a summit between South Korean President Lee Myung-bak and Uzbek President Islam Karimov in Tashkent resulted in 16 separate deals designed to strengthen economic ties being signed by the two countries.
One of those deals covers oil exploration, giving state-run Korea National Oil Corporation (KNOC) full exploration rights to the Namangan-Tergachi and Chust-Pap blocks, expanding a previous agreement from 2006 under which KNOC was allowed to serve as the main contractor for the two fields. In addition, the two leaders agreed on the participation of South Korean companies in developing the Surgil gasfield near the Aral Sea, which holds an estimated 4.7 trillion cubic feet of gas. Production from the Surgil field is expected to be used for a $3bn petrochemicals plant, Uz-Kor Gas Chemical, which Uzbekistan and South Korea agreed last year to develop as a 50/50 joint venture. "South Korea's influence in the Central Asian region is growing as the country demonstrates its determination to secure access to oil and gas resources and a willingness to invest in projects, even where South Korea does not stand to benefit from the future output of oil and gas fields and chemical plants," says Neff.
Nabucco € what's in a name?
bne
May 26, 2009
The EU signed off on a watered-down energy agreement at the beginning of May that gives a boost to its pet gas pipeline project, the badly named Nabucco pipeline, which will run from the Caspian Sea region to Austria via Turkey, bypassing Russia in the process.
The Russians aren't happy about this project as it seeks to break their stranglehold over Caspian gas exports and have been pushing their alternative, the South Stream gas pipeline, which runs from Russia's Black Sea coast via Bulgaria, Greece and Serbia to Italy and Austria. At the EU meeting, Nabucco fans Azerbaijan, Georgia, Turkey and Egypt signed off on a deal that is supposed to see the pipeline pumping gas by 2014, but stopped short of actually committing themselves to a construction timetable, which the EU was hoping for.
The prospects for Nabucco actually being built remain uncertain because Turkey, a key transit country, has linked its support for the pipeline to its stalled efforts to join the EU. And the crucial question of where the pipeline will source its gas also remains largely undecided: apart from Azerbaijan, other countries that could potentially supply the gas - Kazakhstan, Turkmenistan and Uzbekistan – refused to sign even the watered-down deal. Russian Prime Minister Vladimir Putin said scathingly of the pipeline: "If they want to bury a lump of metal in the ground, then they are welcome!"
Russia has the upper hand in the Black Sea region, and after Putin gave real concessions on the price it pays for Central Asian gas in 2008, most of the gas producers in the region are leaning towards Moscow and its South Stream project. The EU has so far largely failed in its stated goal of reducing its dependence on Russian gas by diversifying its energy supplies.
Even the name of the pipeline is bound to cause affront in Moscow. Conceived in 2002, it seems an Italian named the pipeline, as Nabucco is the Italian version of the Babylonian king Nebuchadnezzar’s name. Nebuchadnezzar has two claims to fame. Whoever named the pipeline was probably thinking of the Hanging Gardens of Babylon, which graced the city during his reign. Babylon was the capital of world’s first superpower and went on to conquer most of the known world under king Darius, all of which will already make the Russians squirm in their seats a little. However, his other great historical act was to capture Jerusalem and drive the Jews into their biblical exile. Verdi’s opera “Nabucco,” which is said to be the work that established the Italian's reputation as a leading composer, tells a story of military aggression, betrayal and murder, as Nebuchadnezzar goes on the rampage in the Middle East and angers the gods with his arrogance. Not exactly the best stance to take when dealing with Moscow, who would rather see the pipeline sacrificed on the altar of Baal.
[pic]
Gazprom
Gazprom urges harder work on Nord Stream, South Stream
MOSCOW. May 25 (Interfax) - Gazprom (RTS: GAZP) on Monday called
for more intensive work on the Nord Stream and South Stream gas pipeline
projects in view of Ukraine's feared inability to pay for supplies of
Russian gas for May.
Use of Nord Stream and South Stream "will considerably reduce
transit risks and increase the reliability and flexibility of supplies
of natural gas from Russia in the interests of all the parties - the
suppliers, buyers and ultimate consumers," Gazprom spokesman Sergei
Kupriyanov told reporters.
"The leadership of the EU must give resolute support to efforts to
have those projects put into practice as soon as possible," he said.
StatoilHydro in talks with Gazprom
2009-05-25
Norwegian energy major StatoilHydro is in “intense discussions” with Gazprom over joint projects in Russia, Norwegian newspaper Dagens Næringsliv reports.
According to StatoilHydro spokeswoman Mari Dotterud, company CEO Helge Lund last Wednesday took part in a board meeting in the Shtokman Development AG.
He also met with Gazprom leader Aleksey Miller and leader of Total Christophe de Margerie.
The StatoilHydro-Gazprom talks came the same week as Norway’s Prime Minister Jens Stoltenberg met with President Dmitry Medvedev and PM Vladimir Putin. Accoring to Dagens Næringsliv, StatoilHydro was instrumental in preparations for that meeting.
-We are pleased with the results from the meeting, Ms. Dotterud says. She does not want to speculate on the company’s plans in Russia, but does admit that “opportunities are fantastic”.
As BarentsObserver reported last week, Aleksey Miller and de Margerie that same Wednesday had a meeting Moscow, where progress in the Shtokman project was discussed.
Sibir Energy Agrees With Gazprom Neft on Offer for Minorities
By Mark Sweetman
May 26 (Bloomberg) -- Sibir Energy Plc reached an agreement with OAO Gazprom Neft on the terms of an offer for minority shareholders of Sibir after the oil arm of Russia’s state-run natural gas exporter increased its stake.
Gazprom Neft is offering 500 pence a share, Sibir said in a statement distributed by the Regulatory News Service today.
State-controlled Gazprom Neft, which runs the Moscow refinery with Sibir, increased its stake in the company to about 27.5 percent after a second share purchase on May 22. It had acquired 16.95 percent in April.
Sibir and Gazprom Neft plan to make an offer document available by 5 p.m. London time on May 28, according to today’s statement.
To contact the reporter on this story: Mark Sweetman in Moscow msweetman@
Last Updated: May 26, 2009 02:30 EDT
MAY 26, 2009, 2:31 A.M. ET
Sibir Agrees To Gazprom Neft Takeover At 500p Per Share
By James Herron
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--The board of Russian oil producer Sibir Energy PLC's (SBE.LN) has approved a takeover offer from OAO Gazprom Neft (SIBN.RS) at 500 pence a share in cash, the company said in a statement Tuesday.
Late last week, Gazprom Neft had already amassed a 27.5% stake in Sibir, which produces oil at the Salym field in Western Siberia and operates a refinery in Moscow.
Analysts said Gazprom Neft will be able to maximize value from these assets by consolidating with Sibir.
Sibir Energy has been dogged by corporate governance issues since it agreed to buy distressed real estate assets from its core owner Chalva Tchigirinski in October last year. The company operates a large Siberian oil field with Royal Dutch Shell PLC (RDSB.LN) and holds a 50% stake in the Moscow Refinery, plus retail outlets in Moscow.
-By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317; james.herron@
Gazprom Neft closes in on Sibir
Wire services
The oil arm of Russian gas giant Gazprom is poised to boost its stake in Sibir Energy in what could be the precursor to a full takeover of the mid-sized Siberian producer.
Sibir said in a statement Gazprom Neft had proposed a cash offer for the entire company, excluding shares owned by Bennfield Limited, Central Fuel Company and the Bank of Moscow, which together own more than 40% of the company.
Sibir said it could not guarantee that Gazprom Neft would not seek its delisting if it amassed a 75% stake in the company.
Gazprom Neft said last week it would not try to increase its stake in Sibir to above 30%, although analysts had predicted it would seek full control of the company.
Gazprom Neft bought more than 16% of Sibir in April after trumping rival TNK-BP with a bid valuing the company at about $2.8 billion.
Sibir was previously controlled by two Russian businessmen, Igor Kesayev and Chalva Chigirinsky, with a stake of around 47% split evenly between them. Kesayev has already agreed to sell his 23.3% to Gazprom Neft, Russian media reported.
Sibir said Chigirinsky, who has fled Russia, handed over 2.7% of the company to be sold to Gazprom Neft to cover a $400 million debt to Sibir, along with his Cote d'Azur villa and a London mansion.
Last week, Chigirinsky won a court order barring any transaction with his Sibir stake, held by Bennfield, to which Sibir referred in its statement.
The government of Moscow has 18% in Sibir through its Central Fuel Company.
Sibir is suing Chigirinsky to return the funds he received as part of a failed deal to sell his Russian real estate portfolio to the company.
Tuesday, 26 May, 2009, 07:28 GMT | last updated: Tuesday, 26 May, 2009, 07:34 GMT
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